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Signs of a top-heavy stock market

Forbes believes the fact that the S&P 500's market "weighted" version is trouncing its "equal-weighted" version is a reason to be concerned.

The chart above shows 2 of the many versions of the “S&P 500.”  The blue line shows the most commonly-used version, the one in which each of the roughly 500 stocks is weighted in the index according to its “market capitalization.”  In other words, the amount of stock (outstanding shares that exist, multiplied by the price of the stock) that exists in the market at a point in time.  In this case, the larger the company (in terms of its capitalization), the larger its weighting and influence on the S&P 500 Index.

Tags

wealth management, capital markets